Thursday, December 22, 2011

Hostess Brands on the Verge of Bankruptcy, Possible Liquidation

Let me start off this post by saying that Hostess makes shitty products. Their snack cakes alone have contributed as much as any single factor to the obesity epidemic in America. And Wonder Bread is actually a crime against the fine art of baking. Still, it's tough to see anyone facing the prospect of losing their job, especially right before the holidays. Here is the New York Post with the details:

Hostess Brands, America’s biggest bakery, is on the verge of filing for bankruptcy again — perhaps as early as next month, The Post has learned.

Staying out of Chapter 11 is proving tough for the Twinkies maker, a source said, adding the question now is whether it will be a pre-packaged bankruptcy or not.

“We are working hard to keep it out of [Chapter] 11,” another source close to the months-long talks with lenders and unions said.

The tipping point: Hostess maintains it cannot afford to stay current on its $700 million in outstanding loans and keep contributing to the unions’ pension plans, sources said.

Hostess has not been paying future pension benefits since August, thereby breaking its union contracts.

Even with the pension expense savings, the company still needs more money within the next several weeks. And private-equity firm Ripplewood Holdings, which holds a controlling ownership in Hostess, will not reinvest capital unless it gets its union concessions, one source said.

“I would read that as pretty drastic,” another source said. “It’s not easy to resolve that kind of issue.”

It's an all too common theme these days, lose your benefits or lose your job altogether. Here is a telling quote:

A Hostess worker said, “We understand that, should we pursue some form of legal action to require the company to live up to the terms of the contract, they may close, but we have come to believe that they will close anyway.

So what exactly will bankruptcy mean?

Much is at stake for Twinkie the Kid. The firm filed for Chapter 11 in September 2004 and spent 4 1/2 years there before Ripplewood in February 2009 bought it after gaining union concessions.

There is a concern that if it files again, the result could be liquidation with many of its brands, including Hostess, Wonder, Nature’s Pride, and Drake’s, sold for cash.

In that scenario, the first to be paid would likely be the company’s lenders, including General Electric, Monarch Alternative Capital and Silver Point Capital.

The unions will likely rank behind them in a bankruptcy, and Ripplewood’s equity stake would be wiped out, sources said.

So typical, the financial institutions get paid while the workers get the shaft. Just another sad tale of modern corporate America. Almost makes me wish I had some comfort food to help me forget all my troubles.

12 comments:

The leveraged buyout / cash-out now generation of the 'boomers,' which I've called "The Leaded Generation" in a few oped pieces over the years ... since there has to be some reason for the unyielding, pervasive stupidity and short-sightedness we've inflicted upon the world and its children and the tetra-ethyl-leaded gasoline of our youth is the only thing I can think of to explain it.

I'm betting that the company will be "reorganized" into a non-union workplace; the new employees will be paid peanuts and the new owners will make huge profits. And one more union workplace, where people can actually make enough to live on and have decent benefits, bites the dust.

Localisation will be forced onto people. Without these too-big-to-survive companies we will simply have to learn how to bake our own bread again. We will see more and more local bakeries, bookshops, cobblers and such re-open to serve the needs that won't disappear with the TBTS companies. They will, necessarily, be low-key affairs, under the radar of officialdom, operating in a shadow local economy of barter and local currency.The future is bright. Bring it on.

The workers should take over the company, make it employee-owned, and then start baking something with a little more integrity. It seems like their claims against their retirement funds should be enough to force a takeover. Or did some corporate congressional henchmen make that illegal?

I work in sanitation in hodgekins,2-shifts,but 3-managers-waste of money from the start there,these 3 have numerous weeks of vacations,overpaid for sure,thats just a little piece of mis-management,just imagine the rest..what a shame..

Have'nt you ever heard the saying ;The rich get richer and the poor get poorer;. Did you ever really believe any one cared how you supported yor families?? Greed got them into this mess and poverty for you will get them out. Some one should of told them to get back to the basics, the white ,wheat and rye.ham and hots. With the unemployment who do they think is going to buy their high priced bread??????

mgmt. claims to be broke , because they have to pay employees . yet twice, in 5 years , workers took HUGE pay & benefit cuts . each tine , mgmt. people were handed cash bonuses . hostess mgmt. is corrupt & the company cash-box leaks like a seive .

WHO REMEMBERS BAKERS INN?? we were told this product would make or break the company. TRUER WORDS WERE NEVER SPOKEN. cuz it seems ever since then the company has been F@%KED!!! HATS OFF TO THE MGT with their SOAR IN 04, PATH TO MARKET PHLOSIPHY aint nothing worked especially YOU ALL.... THE MGT

I got out in DEC. I, fortunately had in my golden 80 and got out from in front of the fan before the s--t hit it.The poor guys in my depot will now pay the price for short sitedmanagement blunders and greed.I am now done with my break. Still looking for a part time job that will help me cover my bills that the pension doesn't.